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If the Mauritian tax treaty is such a pain for India, then they should just get rid of it. They clearly haven't, so it must be of some value -- thus you can't s

If the Mauritian tax treaty is such a pain for India, then they should just get rid of it. They clearly haven't, so it must be of some value -- thus you can't shame companies for using it to legally sidestep taxes.

rohit2412 7y ago
It is a pain to India. It is not a pain to the politicians though.
- JumpCrisscross 7y ago
  > It is a pain to India Do we have evidence of this? A lot of investment into India would not occur without a stable legal and tax environment on which to stage it. Traditionally, those have been Singapore and Mauritius.
  - jddj 7y ago
    Are we sure that it's the stability of Mauritius which is the sought after quality here? That seems a little euphemistic. Not that it's an unstable nation, all things considered, but I feel like it goes without saying that these companies and individuals are almost definitely solving for minimal tax rather than maximal "stability". From the article, quoted from a leaked email: This is primarily being done to ensure the Druva restructure does not result in it becoming taxable.
    - JumpCrisscross 7y ago
      > it goes without saying that these companies and individuals are almost definitely solving for minimal tax rather than maximal "stability" Why does it go without saying? Indian courts can take 10+ years to resolve simple disputes; Mauritian courts are much faster. A portfolio of stocks and bonds held in a Mauritian entity costs a few tens of U.S. dollars of extra accounting costs to do taxes on a year; a portfolio in India held by a foreigner can easily cost hundreds of dollars for an American investor to comply with.
      - jddj 7y ago
        > Why does it go without saying? Mainly because their motivations for doing so (namely: tax avoidance) were spelled out by the companies and their accountants in a series of email leaks. That's the thread we're in right now. Australia and Canada have DTAs with India too. Pretty stable countries by most people's reckoning, potentially moreso than Mauritius and both with solid legal systems. Yet we aren't seeing PwC recommend to Silicon Valley investment firms that they spin up Australian shell companies to facilitate Indian investment. We could probably speculate as to why not, or we could look at what the companies and their accountants said in the aforementioned series of leaked emails. It's tax avoidance. It's not illegal, but it's not simplification or stability.
      - SmileyRedBall 7y ago
        @JumpCrisscross: "A portfolio of stocks and bonds held in a Mauritian entity costs a few tens of U.S. dollars of extra accounting costs to do taxes on a year; a portfolio in India held by a foreigner can easily cost hundreds of dollars for an American investor to comply with." Yea, it's got nothing to do with extracting the maximum amount of revenue out of the host country whilst managing to avoid giving anything back in taxation :]
        JumpCrisscross 7y ago
        > whilst managing to avoid giving anything back in taxation I’m comparing accounting costs. Both paid to the same offshore accountant. Indian tax codes are complicated and unpredictable. Mauritian ones are not. As an outsider, simplicity wins. (I’d gladly pay a higher foreign tax rate if it meant simpler paperwork.)
newyankee 7y ago
If the world was so simple.
coldtea 7y ago
Yeah, because a country is a person, and looks after its own best interest -- not an area, often ruled and exploited by ruthless opportunists the detriment of the population...
- charlesdm 7y ago
  By that reasoning, every double taxation treaty that contains some sort of exemption is exploitative. The Mauritian treaty does not contain any abnormal clauses that are uncommon in intra EU treaties and for example, most US-EU treaties. Double taxation treaties are a way to incentivise people to invest in a specific country. Generally both countries exempt (or promise to partially exempt) booked income from the other country so that it does not get taxed twice. It does not exempt them from all taxation whatsoever. But an example: if as a UK resident you invest in the US and book a capital gain on a shareholding, you won't pay US capital gains tax. That will be exempt. But you will pay capital gains tax in the UK.
  - coldtea 7y ago
    >By that reasoning, every double taxation treaty that contains some sort of exemption is exploitative. If they are treaties with tax havens, places used purposefully for those reasons, then yes, they are.
    - JumpCrisscross 7y ago
      > If they are treaties with tax havens, places used purposefully for those reasons "Tax haven" is an ambiguous term. Double taxation treaties exist so investments aren't taxed twice, once at the origin and again at the destination. The Indian-Mauritian treaty mostly covers capital gains, and in that way is similar to most such treaties. The principal benefit of jurisdictions like Mauritius, the Cayman Islands, Delaware or Singapore is less to reduce taxes than to simplify them. Indian taxes are wonky and volatile. Indian courts are slow and expensive. Going through Mauritius lets an international investor finance projects in India while abstracting away a lot of cruft.

rohit2412 7y ago

It is a pain to India. It is not a pain to the politicians though.

JumpCrisscross 7y ago
> It is a pain to India Do we have evidence of this? A lot of investment into India would not occur without a stable legal and tax environment on which to stage it. Traditionally, those have been Singapore and Mauritius.
- jddj 7y ago
  Are we sure that it's the stability of Mauritius which is the sought after quality here? That seems a little euphemistic. Not that it's an unstable nation, all things considered, but I feel like it goes without saying that these companies and individuals are almost definitely solving for minimal tax rather than maximal "stability". From the article, quoted from a leaked email: This is primarily being done to ensure the Druva restructure does not result in it becoming taxable.
  - JumpCrisscross 7y ago
    > it goes without saying that these companies and individuals are almost definitely solving for minimal tax rather than maximal "stability" Why does it go without saying? Indian courts can take 10+ years to resolve simple disputes; Mauritian courts are much faster. A portfolio of stocks and bonds held in a Mauritian entity costs a few tens of U.S. dollars of extra accounting costs to do taxes on a year; a portfolio in India held by a foreigner can easily cost hundreds of dollars for an American investor to comply with.
    - jddj 7y ago
      > Why does it go without saying? Mainly because their motivations for doing so (namely: tax avoidance) were spelled out by the companies and their accountants in a series of email leaks. That's the thread we're in right now. Australia and Canada have DTAs with India too. Pretty stable countries by most people's reckoning, potentially moreso than Mauritius and both with solid legal systems. Yet we aren't seeing PwC recommend to Silicon Valley investment firms that they spin up Australian shell companies to facilitate Indian investment. We could probably speculate as to why not, or we could look at what the companies and their accountants said in the aforementioned series of leaked emails. It's tax avoidance. It's not illegal, but it's not simplification or stability.
    - SmileyRedBall 7y ago
      @JumpCrisscross: "A portfolio of stocks and bonds held in a Mauritian entity costs a few tens of U.S. dollars of extra accounting costs to do taxes on a year; a portfolio in India held by a foreigner can easily cost hundreds of dollars for an American investor to comply with." Yea, it's got nothing to do with extracting the maximum amount of revenue out of the host country whilst managing to avoid giving anything back in taxation :]
      - JumpCrisscross 7y ago
        > whilst managing to avoid giving anything back in taxation I’m comparing accounting costs. Both paid to the same offshore accountant. Indian tax codes are complicated and unpredictable. Mauritian ones are not. As an outsider, simplicity wins. (I’d gladly pay a higher foreign tax rate if it meant simpler paperwork.)

newyankee 7y ago

If the world was so simple.

coldtea 7y ago

Yeah, because a country is a person, and looks after its own best interest -- not an area, often ruled and exploited by ruthless opportunists the detriment of the population...

charlesdm 7y ago
By that reasoning, every double taxation treaty that contains some sort of exemption is exploitative. The Mauritian treaty does not contain any abnormal clauses that are uncommon in intra EU treaties and for example, most US-EU treaties. Double taxation treaties are a way to incentivise people to invest in a specific country. Generally both countries exempt (or promise to partially exempt) booked income from the other country so that it does not get taxed twice. It does not exempt them from all taxation whatsoever. But an example: if as a UK resident you invest in the US and book a capital gain on a shareholding, you won't pay US capital gains tax. That will be exempt. But you will pay capital gains tax in the UK.
- coldtea 7y ago
  >By that reasoning, every double taxation treaty that contains some sort of exemption is exploitative. If they are treaties with tax havens, places used purposefully for those reasons, then yes, they are.
  - JumpCrisscross 7y ago
    > If they are treaties with tax havens, places used purposefully for those reasons "Tax haven" is an ambiguous term. Double taxation treaties exist so investments aren't taxed twice, once at the origin and again at the destination. The Indian-Mauritian treaty mostly covers capital gains, and in that way is similar to most such treaties. The principal benefit of jurisdictions like Mauritius, the Cayman Islands, Delaware or Singapore is less to reduce taxes than to simplify them. Indian taxes are wonky and volatile. Indian courts are slow and expensive. Going through Mauritius lets an international investor finance projects in India while abstracting away a lot of cruft.